The Federal Housing Administration published revised guidelines for lenders, which clarified how to manually underwrite mortgage loan applications of borrowers applying for FHA-insured mortgages, the U.S. Department of Housing and Urban Development said.
The new changes work to improve a lender’s ability to objectively consider a borrower’s risk and reduce additional credit requirements or overlays that exceed FHA standards.
In addition, the new guidelines address loan characteristics such as high debt-to-income ratios and a lack of financial reserves that often lead to high rates of default and foreclosure.
“We want to provide revised guidance for our lenders so that they are confident in offering affordable mortgage loans to responsible borrowers under a reasonable set of guiding principles,” said FHA Commissioner Carol Galante. “We hope to bring more certainty to the market by helping lenders apply a set of consistent underwriting standards.”